Hard for Malaysia Airlines to survive after two disasters

Jul. 17, 2014
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A file photo taken on March 18, 2013 shows a Malaysia Airlines Boeing 737 plane flying over the Sukarno-Hatta airport in Tangerang. Malaysia Airlines said on July 17, 2014 that it had "lost contact" with one of its passenger planes whose last known position was over Ukraine. / Adek Berry, AFP/Getty Images

by Bart Jansen, USA TODAY

by Bart Jansen, USA TODAY

Malaysia Airlines was in dire financial straits even before losing a plane on March 8, and analysts said it may be difficult for the national carrier to continue after the latest catastrophe Thursday.

The reason Flight 370 went missing with 239 people aboard is unknown, and Flight 17 with 295 people aboard appears to have been shot down by military forces. But analysts say the two disasters could make it difficult for the airline to continue operating.

"It will be tough," said Robert Mann, of R.W. Mann & Co. in Port Washington, N.Y., who noted that the airline and Malaysian tourism generally were already suffering before March.

Despite growing, the airline has lost money for years because of higher fuel costs and airport charges, competition from low-cost carriers and weakening currency against the dollar, according to the company.

"This incident is more grave news for an airline that doesn't need it," said Henry Harteveldt, an analyst at Atmosphere Research Group in San Francisco. "It is imperative for the airline and relevant authorities to determine whether the crash is the result of external fire from the ground, and thus, outside Malaysia Airline's control, or a problem with the aircraft or its crew."

Harteveldt said the airline would need new leadership if it is to continue, because of lingering concerns about the missing plane.

"The airline absolutely must take urgent, tangible, and meaningful steps to show it is in control of its destiny," Harteveldt said. "Though its airplanes fly, as a business, Malaysia Airlines seems to lurch from one day to the next."

Mann said that ironically, damage to the airline's reputation would be less severe if the plane was shot down, which U.S. intelligence officials said late Thursday was indeed the case.

Richard Aboulafia, an aviation consultant as vice president at Teal Group in Fairfax, Va., said as a state-backed carrier, the airline wouldn't feel the same financial pressures as Pan Am after Flight 103 blew up over Lockerbie, Scotland.

"If the powers that be want to back you, you're fine," Aboulafia said. "Given the way things are shaping up, this is an airline that is the victim of nothing more than very bad luck."

The plane that went down Thursday, a Boeing 777-200ER, is a similar model to the one that disappeared on March 8 with 239 people aboard on a flight from Kuala Lumpur to Beijing. The search for that flight has focused on the Indian Ocean about 1,000 miles west of Australia, based on intermittent signals that a satellite picked up.

Malaysia Airlines, the country's national carrier, flies about 37,000 passengers aboard 250 departures daily to 80 destinations, according to the company's website.

It boarded 13 million passengers in 2011, generating revenue of about $4.5 billion, according to the website. That revenue compares with a smaller airline, such as JetBlue Airways, for the same year.

Malaysia Airlines' fleet of 88 aircraft includes Boeing 747-400, 777-200ER, 737-800 and 737-400, as well as Airbus A330-300, A330-200 and its flagship A380-800.

The airline considered the July 2012 launch of its A380 service from Kuala Lumpur and London Heathrow as a major milestone in a history that began with its incorporation as Malayan Airways Limited (MAL) on Oct. 12, 1937.

The airline has won numerous awards from industry groups Skytrax UK and the World Travel Awards for the quality of its cabin crews, food and general excellence. World Travel Awards called it the best airline in Asia in 2013.

Service began between Penang , Malaysia, and Singapore, and Malayan Airways had its first commercial flight as a national airline on April 2, 1947, according to the company's website. In less than a decade, the airline began international flights.

The airline changed its name to Malaysian Airlines Limited with the formation of Malaysia in 1963. Two years later, with the separation of Singapore, the airline became a bi-national airline, Malaysia-Singapore Airlines. That partnership ended in 1972, and the airline later was renamed Malaysia Airlines.

Malaysia Airlines became a full member of the Oneworld airline alliance in February 2013 and is now connected to 850 destinations through that network.

The airline's last crash was Sept. 15, 1995, when a Fokker 50 crashed and killed 34 people out of 53 on board, according to a summary at the Flight Safety Foundation.

The investigation found the plane touched down 500 meters short of the runway, probably due to the pilot's poor decision-making and failure to follow standard procedures, according to the foundation's summary.

Other factors were the co-pilot's failure to alert the captain to unsafe maneuvers and the controller's failure to provide better assistance, according to the summary.